Hedge Funds Are Nibbling On Broadcom Inc (AVGO)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Broadcom Inc (NASDAQ:AVGO) and determine whether the smart money was really smart about this stock.

Broadcom Inc (NASDAQ:AVGO) has experienced an increase in support from the world’s most elite money managers of late. Broadcom Inc (NASDAQ:AVGO) was in 59 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 83. Our calculations also showed that AVGO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most traders, hedge funds are viewed as unimportant, outdated investment tools of years past. While there are more than 8000 funds in operation at present, We look at the aristocrats of this group, about 850 funds. These investment experts have their hands on the majority of all hedge funds’ total capital, and by shadowing their matchless equity investments, Insider Monkey has determined numerous investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

William Von Mueffling - Cantillon Capital Management

William Von Mueffling of Cantillon Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s take a glance at the new hedge fund action encompassing Broadcom Inc (NASDAQ:AVGO).

How are hedge funds trading Broadcom Inc (NASDAQ:AVGO)?

At Q2’s end, a total of 59 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the first quarter of 2020. By comparison, 53 hedge funds held shares or bullish call options in AVGO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC has the largest position in Broadcom Inc (NASDAQ:AVGO), worth close to $415.9 million, amounting to 5.6% of its total 13F portfolio. The second largest stake is held by William von Mueffling of Cantillon Capital Management, with a $370.8 million position; 3.2% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions include Andrew Wellington and Jeff Keswin’s Lyrical Asset Management, Ken Griffin’s Citadel Investment Group and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Provenire Capital allocated the biggest weight to Broadcom Inc (NASDAQ:AVGO), around 7.94% of its 13F portfolio. Crescent Park Management is also relatively very bullish on the stock, earmarking 5.64 percent of its 13F equity portfolio to AVGO.

Consequently, key money managers have jumped into Broadcom Inc (NASDAQ:AVGO) headfirst. Newbrook Capital Advisors, managed by Robert Boucai, created the most outsized position in Broadcom Inc (NASDAQ:AVGO). Newbrook Capital Advisors had $60.1 million invested in the company at the end of the quarter. Renaissance Technologies also made a $32.5 million investment in the stock during the quarter. The other funds with new positions in the stock are John Hurley’s Cavalry Asset Management, Matthew Hulsizer’s PEAK6 Capital Management, and Anthony S. Daffer’s Provenire Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Broadcom Inc (NASDAQ:AVGO). These stocks are BHP Group (NYSE:BHP), Danaher Corporation (NYSE:DHR), Medtronic plc (NYSE:MDT), Royal Dutch Shell plc (NYSE:RDS), NextEra Energy, Inc. (NYSE:NEE), Texas Instruments Incorporated (NASDAQ:TXN), and Union Pacific Corporation (NYSE:UNP). This group of stocks’ market caps are closest to AVGO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BHP 16 761158 -2
DHR 76 4287603 13
MDT 58 2705363 -1
RDS 34 1164812 6
NEE 55 1943660 3
TXN 55 2131731 9
UNP 68 3685933 5
Average 51.7 2382894 4.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 51.7 hedge funds with bullish positions and the average amount invested in these stocks was $2383 million. That figure was $2379 million in AVGO’s case. Danaher Corporation (NYSE:DHR) is the most popular stock in this table. On the other hand BHP Group (NYSE:BHP) is the least popular one with only 16 bullish hedge fund positions. Broadcom Inc (NASDAQ:AVGO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AVGO is 67.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately AVGO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AVGO were disappointed as the stock returned 5.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.